HSL’s near-term earnings remain visible

KUCHING: Hock Seng Lee Bhd’s (HSL) earnings is expected to remain visible in the near future, underpinned by various factors including a strong orderbook of RM2.1 billion, the research arm of AmInvestment Bank Bhd (AmInvestment Bank) observed.

Following a recent visit, the research team noted that HSL had indicated it would continue to be a specialised contractor in Sarawak, focusing on its core business which comprises of land reclamation, waste water management and flood mitigation.

“We expect earnings to remain visible in the near future underpinned by strong outstanding order book of RM2.1 billion that will keep HSL busy over the next three to four years, and gains through civil and marine engineering and construction works from massive infrastructure developments such as roads (anchored by the RM16 billion Pan Borneo Sarawak Highway and the RM12.8 billion Pan Borneo Sabah Highway), ports, hydro power plants and water/ wastewater treatment facilities,” it opined.

It explained that the progress on building and upgrading roads along the Pan Borneo Highway is “good” at circa six per cent completion to date.

“HSL expects progress to pick up pace in 2018 after completing the initial stage works.

“The construction of the stretch awarded to HSL requires circa four million metric tonnes (MT) of aggregates (building material) and HSL would be sourcing the material internally from its quarry which is able to produce two million MT annually. The current utilisation rate for the quarry is 20 per cent,” it noted.

Aside from that, it pointed out that HSL continued to procure two additional wastewater management systems ( WMS) both in Kuching and Miri after the successful completion of WMS in Kuching (Phase 1).

“The two projects are Kuching WMS (Phase 2) and Miri City WMS ( Phase 1A) worth RM563 million and RM333 million respectively.

“These two projects would adopt the similar approach as Kuching Phase 1, using the gravity floor system.

“The progress for these two projects is still in the early stage, and further recognition will be realised in the financial year 2018 ( FY18) when it deploys its heavy equipment such as tunnel boring machine ( TBM) to this two sites. Currently, HSL owns 12 TBM,” AmInvestment Bank added.

Meanwhile, the research team noted that HSL is set to procure other contracts by the Sewerage Service Department Sarawak.

“In addition, HSL will continue bidding for road and bridge construction projects. Currently, there are four bridges that are yet to be awarded worth RM1.55 billion allocated by the federal government,” it added.